Downie, Andrew --- "Playing the ball and not the man: the duty to an opponent" [2014] PrecedentAULA 34; (2014) 123 Precedent 26

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PLAYING THE BALL AND NOT THE MAN: THE DUTY TO AN OPPONENT

By Andrew Downie

A lawyer’s paramount duty is to the administration of justice, and integral to this is the lawyer’s duty to the court.^[1] The fiduciary duty to the client is subject to the duty to the court.^[2] This can require a lawyer to act in ways to the possible disadvantage of the client.^[3] For instance, making the court aware of authorities both for and against the client’s position,^[4] and not misleading the court despite the client’s instructions to do so.^[5]

As part of the duty to the administration of justice, the lawyer owes a duty to an opponent, whether an opposing lawyer or party.^[6] This results in a much greater degree of conflict with the duty to the client since the interests of the opponent and the client are almost always opposite.

For instance, where an opponent is laboring under a mistake and this is to the benefit of your client, do you have an obligation to bring that mistake to the opponent’s attention? Also, if you know facts that would cause your opponent to radically change his or her advice on whether his or her client should settle a matter, should you bring this to the attention of the opponent before his or her client signs terms of settlement? What about inadvertent production of sensitive documents by your opponent that assists your case?

These issues are considered below, in light of the complex legal framework comprised of court rules, professional practice rules, civil procedural reform legislation and consumer protection legislation.

THE FRAMEWORK

Recent civil procedure reforms in Victoria^[7] and New South Wales^[8] have legislated the overriding duty owed by practitioners and parties to the court to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. This purpose is incorporated in one form or another in the rules of the states^[9] and territories^[10] and Federal Court^[11] and is central to the discussions below about the duties owed by one practitioner to another. The Civil Procedure Act 2010 (Vic) goes further than a broad purpose statement and includes ‘overarching obligations’ to, among other things, cooperate, act honestly, not mislead or deceive (analogous to s18 of the Australian Consumer Law), ensure costs are reasonable and proportionate, and to only take steps to resolve or determine a dispute.^[12]

The professional conduct rules in each state and territory of Australia prohibit knowingly making a false statement to an opponent, but (apart from the Victorian Bar Practice Rules) provide that the failure to correct an error on behalf of an opponent is not a false statement to the opponent. The Western Australia Legal Profession Conduct Rules 2010 go further and provide that the failure to correct an error may be a false statement if, by the practitioner’s silence, the opponent might reasonably infer that the practitioner is affirming the statement.^[13]

DUTY TO CORRECT MISTAKES

In Chamberlain v The Law Society of the Australian Capital Territory,^[14] a lawyer was assessed for income tax by the Deputy Commissioner for Taxation (the ‘DCT’) in the sum of $255,579.20. The DCT issued proceedings against the lawyer, but made a mistake in the placement of the decimal point in the writ, claiming $25,557.92 instead. Realising the error and seeking to take advantage of estoppel raised by a judgment, the lawyer prepared terms of settlement and a form of consent to judgment for the claimed amount, and paid the said sum. The DCT could not recover the balance, despite almost exhaustive effort.

Four out of a five-member bench of the Full Federal Court found that the lawyer engaged in professional misconduct. The majority held, based on a practice rule, that where an opponent made or is about to make, a mistake then the practitioner must not do or say anything to induce or foster the mistake and, except where doing so might prejudice his or her own client, was to draw the attention of the other practitioner to that mistake.^[15] Black CJ noted that this provided a balance between a desire to avoid unnecessary expense and delay occasioned by mistakes on the one hand and the interest of a practitioner’s client on the other.

The majority held that by providing the terms of settlement and minute of order, the practitioner induced or fostered the mistake of entering into the consent judgment. Black CJ said that the DCT made a mistake as a consequence of Chamberlain having put into operation a plan that was designed to get the DCT to do what he in fact did.

Black CJ noted that despite the outcome, in different circumstances it might be quite acceptable to take advantage of an opponent’s mistake, but a line has to be drawn somewhere and fine distinctions must be made.^[16] The dissenting member, Jenkinson J, considered that the conduct was permissible and said that taking advantage of an opponent’s mistake was an instance of a party using ‘the weapons which the law allows the combatants’.^[17] This difference of view reflects the difficulty in working out where to draw the line.

Twenty years later a similar issue arose in In the matter of Fratelli’s Fresh Pasta Pty Ltd.^[18] There, a defendant sought to take advantage of a six-month limitation period under the Corporations Act 2001 (Cth) for winding up applications. Just before the expiry of the limitation period, the defendant agreed to consent orders extending the interlocutory timetable for the winding up proceeding beyond the limitation date, with the effect that the proceeding would be automatically dismissed. The plaintiff was ignorant of the operation of this limitation period. When called before the court, the defendant’s counsel and solicitor said that they were aware of the limitation period, and submitted that they were under no obligation to alert the plaintiff to its mistake.^[19]

White J discredited the ‘ambush’ approach to litigation, said that it was inconsistent with the duties of parties and their legal representatives to ensure the just, quick and cheap resolution of the real issues in the proceeding, and had the proceeding been dismissed, the real issue – the insolvency of the defendant – would not have been determined apart from in fresh proceedings issued after the dismissal.^[20] White J referred to the decision of Allsop J in White v Overland^[21] in which His Honour held that although a representative does not owe a duty to the other side’s client, as a general rule the duty to the administration of justice obliges a party to ensure that the other party is not proceeding on a misconception.^[22]

White J held that by reason of the defendant executing the consent orders and not alerting the plaintiff or the court to the oversight, the defendant and its legal advisers went beyond staying silent in the hope that the plaintiff would fall foul of the limitation period.^[23]

Although Fratelli does suggest that staying silent may be adequate, Chamberlain makes it clear that unless doing so prejudices your own client, the mistake should be brought to the opponent’s attention. What constitutes prejudice to the client is unclear. Arguably, any mistake that is likely to result in wasted costs for the opponent could, if corrected, prejudice the client in a strategic sense. However, this appears to be the kind of opportunism that the courts are seeking to avoid, as wasted costs for the opponent usually means wasted resources for the courts in having to deal with amendments, adjournments and arguments.^[24]

OBLIGATION TO NOT MISLEAD AND TO DISCLOSE FACTS

In Chamberlain, Black CJ noted that conduct that fosters or induces a mistake might involve misrepresentation.^[25] The Western Australia Legal Profession Conduct Rules 2010 set out the circumstances when silence might be misleading conduct. At common law, silence is considered to amount to misleading or deceptive conduct if there are ‘facts giving rise to a reasonable expectation, in the circumstances of the case that if particular matters exist they will be disclosed’.^[26]

Commentators suggest that a reasonable expectation of disclosure is most likely to be identified in the two situations already treated by the common law as involving actionable misrepresentations, including where a combination of what is said and what is left unsaid creates a half truth; or where a statement that may have been true at the time ceases to be true.^[27]

In LSC v Mullins,^[28] a barrister, Mullins, was acting for a client rendered quadriplegic in a car accident. Mullins was instructed to pursue a claim for compensation from an insurer and relied on a series of reports based on the client’s life expectancy, being that of a normal male less 20 per cent. A few days before the mediation, the client conferred with Mullins and the instructor and told them that he had recently been diagnosed with cancer. The client said that he did not wish to reveal this information unless legally obliged to do so. The law in Queensland required an insured individual to disclose to an insurer any significant change in medical condition within one month of becoming aware of the change; the mediation was scheduled less than one month after the insured became aware of the condition.

Mullins conducted research and asked senior counsel about whether he was obliged to disclose the cancer, and formed the view that he was not obliged to do so, provided he did not make positive assertions during the mediation. In the mediation, Mullins did not disclose the cancer and relied on the expert reports already served, also making assertions as to the reasonableness of the reports, and obtained a settlement for the client not taking into account the client’s condition. The client died and the insurer investigated the reason for the death and sued Mullins. That proceeding settled.

Disciplinary proceedings were brought against Mullins. Mullins was found to have intentionally and fraudulently deceived the insurer about the accuracy of the assumption that the client’s life expectancy was that of a normal male less 20 per cent, and did so intending the insurer to be influenced by this and to compromise the claim.

Mullins argued that his conduct was not equivalent to a representation that he was not aware of facts that could negatively impact on his client’s longevity, and that the commercial nature of the negotiations meant that the parties would rely on their own resources and information. In dealing with this Byrne J held that the ‘contentions presuppose that neither the general law nor any more demanding ethical duty required disclosure of the cancer facts or else disavowal of the life expectancy assumption’ and opined that the fact that the negotiations were commercial in nature served ‘to support the idea that the negotiants anticipate a measure of honesty from each other’.^[29]

LPCC v Fleming^[30] involved a sole beneficiary under an informally executed will. The will was informal as it was executed by her deceased husband, but it was not witnessed. The deceased had siblings who would have benefited from the estate of the deceased in the event of intestacy. The beneficiary instructed a solicitor, Fleming, to obtain probate and to not disclose the will, or the circumstances of its execution, to the siblings. The relevant probate rules required, when applying for probate, the consent of those who would be prejudiced by an application for probate. It was explained to the client by Fleming that unless the siblings agreed that they had no interest in the estate, then the client would be required to provide the will to the siblings and obtain their consent to probate.

The following occurred:

• There was a meeting between the lawyers for the parties, where Fleming responded ‘yes’ to a question from the solicitor for the siblings along the lines ‘so the deceased’s will left everything to the client?’

• Fleming wrote a letter to the solicitor for the siblings expressing concern that the siblings would challenge the will on the basis of testamentary capacity, and seeking a covenant for the siblings to not challenge the will and to do everything necessary to assist the client to obtain probate.

• In response to a deed from the siblings which contained a recital which referred to the will as an annexure to the deed, Fleming disagreed with the recital in its entirety on the grounds that its contents were inaccurate, the effect of which was to indirectly refuse the solicitor’s request that the will be annexed to the deed.

• An agreement was reached, including the covenant sought by Fleming, and the deed was executed.

• The siblings found out about the informal nature of the will and they sought to set aside the deed.

The Western Australian Administrative Tribunal found that each matter engaged in by Fleming conveyed the imputation that there existed a properly executed will.^[31] The Tribunal also found that Fleming’s response to the deed was conduct that sought to avoid disclosure of the informal nature of the will, and thus maintained the misleading impression that the deceased had left a valid will.^[32] Also, the letter seeking the covenant was misleading as it conveyed the impression that the client was concerned about challenges to the will on a wholly different basis, when the client was concerned about a challenge to the will on the basis that it was not formally executed.^[33] Instead, the purpose of obtaining this covenant was to avoid the need to obtain the consent of the siblings to probate.

In the course of finding that Fleming’s conduct was dishonest and unfair, the Tribunal considered that Fleming was the moving force in the other side’s misconception, pursued by Fleming to obtain a material advantage for the client.^[34] The Tribunal also held that the conduct, having occurred during without prejudice negotiations, was not protected from disclosure because of the misleading and unfair nature of the conduct.^[35]

In Kuek v Devflan Pty Ltd & Anor,^[36] Kuek, a lawyer, had engaged in extensive litigation and appeals and was ordered to pay costs of a taxation on an indemnity basis. The Supreme Court of Victoria received Kuek’s application to review the costs order around five-and-a-half months after the order was made, despite the rules requiring a review application be filed within 14 days. Kuek deposed to having filed the review around 15 days after the order was made, and blamed the Court for the delay in filing. During that five-and-a-half month period, the respondent filed and served a bill of costs and summons for taxation, and Kuek served a notice of objection to the bill, but did not mention that he was seeking a review of the underlying costs order or follow up the court about the status of the review.

In considering an application by Kuek to extend time to allow the review to be filed, Mukhtar AsJ grappled with whether Kuek’s conduct was misleading or deceptive, and in the end held that the conduct was a breach of the overarching obligation to cooperate^[37] and to minimise delay.^[38] It appears that the Court’s reluctance to make a finding that the conduct was misleading or deceptive arose from it being unclear whether there was any reliance by the respondent on the conduct of Kuek.^[39] Kyrou J dismissed an appeal, noting that it was arguable that Kuek’s behaviour misled the defendants, in the sense that it induced a belief that Kuek would not seek a review of the order.^[40]

The conduct in Mullins, Fleming and Kuek involves more active inducement and fostering than in Chamberlain and Fratelli. In the former three matters, the lawyers are the source of the mistake. In the latter two, the lawyers are taking advantage of a mistake made. However, even though the answer to the former three may seem obvious now, the extent of the inquiries made by Mullins and the source of his advice (that is, from senior counsel) suggests that the answer is not always clear, except perhaps in hindsight.

OBLIGATION TO RETURN DOCUMENTS

At present the New South Wales, Queensland, South Australia and Western Australia Solicitors’ Rules require the return of documents to an opponent where there is inadvertent disclosure of confidential documents.

The High Court recently commented that such a rule should not be necessary, as ‘in the not too distant past it was understood that acting in this way obviates unnecessary and costly interlocutory applications’.^[41] In ERA v Armstrong, a firm of solicitors, Norton Rose, gave general discovery on behalf of a client, ERA. This included 13 documents that the client intended to claim privilege over, but which were inadvertently listed as non-privileged and produced for inspection. The error appeared to result from a mistake in the process of reviewing and identifying documents in large-scale discovery. On receipt of the documents, Marque Lawyers, for Armstrong, sent a letter to Norton Rose noting that otherwise privileged communications had been produced. Norton Rose wrote to Marque Lawyers stating that the production was a mistake and requested the documents be returned. Marque Lawyers refused to return the documents and claimed waiver of privilege.

Marque Lawyers was successful in the NSW Supreme Court and Court of Appeal. On appeal, the High Court of Australia unanimously ordered the return of the documents to Norton Rose. The High Court noted that times have changed since the decision of Slade LJ in Guinness Peat Properties Ltd v Fitzroy Robinson Partnership,^[42] and case management concerns, including specific case management powers in the rules,^[43] now give courts the power to order the return of mistakenly produced documents to further the ‘overriding purpose’; that is, the just, quick and cheap resolution of the real issues in the dispute or proceedings.^[44] The High Court considered the pursuit of satellite interlocutory proceedings, in circumstances where the discovery dispute was a minor issue and offered very little advantage to the recipient, would not fulfill the overriding purpose and is the kind of conduct to be avoided.^[45] Also, a mistake had been made and this fact was not disputed. As such, there was no question of waiver sufficient to be agitated, and it was necessary that the mistake be corrected and the parties continue with their preparation for trial.^[46]

CONCLUSION

In White v Overland^[47] the court noted that there is no duty to an opponent: just a duty to further the administration of justice. Lawyers further the administration of justice by cooperating with the court and their opponents for the just, efficient, timely and cost-effective resolution of the real issues in dispute.

The cases above demonstrate that taking advantage of, or inducing, an error is unlikely to be productive because the person making the error usually has means to undo the error (except for Chamberlain), at that person’s inconvenience and expense, and at the expense of court resources. Even if the incurring of expense or inconvenience by an opponent is regarded as a benefit to the client, this benefit is likely to be illusory as it should always be outweighed by the risk of an adverse costs order, including against that person’s lawyer,^[48] and the risk of disciplinary consequences for a lawyer engaging in that sort of conduct. Finally, this kind of conduct is likely to do long-term damage to the reputation of that lawyer in the mind of the profession and the court.

Andrew Downie is a barrister with Melbourne TEC Chambers and Owen Dixon Chambers West. Andrew has a commercial law practice. PHONE [phone] EMAIL [e-mail].

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^[1] Giannarelli v Wraith (1988) 165 CLR 543, 556-7 (Giannarelli).

^[2] Ibid, [556].

^[3] Ibid.

^[4] Victorian Bar Practice Rules, r17.

^[5] Ibid, r19.

^[6] White v Overland [2001] FCA 1333, [4].

^[7] Civil Procedure Act 2010 (Vic) (the CPA Vic).

^[8] Civil Procedure Act 2005 (NSW) (the CPA NSW).

^[9] For example, Uniform Civil Procedure Rules 1999 (Qld), r5.

^[10] For example, Court Procedure Rules 2006 (ACT), r21.

^[11] For example, Federal Court Rules 2011, r20.11 (discovery).

^[12] CPA Vic, Part 2.3.

^[13] Legal Profession Conduct Rules 2010 (WA), r37(3) (the WA Solicitor Rules).

^[14] [1993] FCA 527; (1992) 43 FCR 148 (Chamberlain).

^[15] Chamberlain, 60.

^[16] Ibid, [60].

^[17] Ibid, [75].

^[18] [2011] NSWSC 576 (Fratelli).

^[19] Fratelli, [18].

^[20] Ibid, [19], [25].

^[21] [2001] FCA 1333.

^[22] Fratelli, [20].

^[23] Ibid, [23].

^[24] AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 217.

^[25] Chamberlain, 61.

^[26] Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31, 32.

^[27] B Wolski, ‘The truth about honesty and candour in mediation: what the Tribunal left unsaid in Mullins’ case’ [2012] Melbourne University Law Review V36:706, 722; and A Stewart and L McClurg, ‘Playing Your Cards Right: Obligations of Disclosure in Commercial Negotiations’, [2007] AMPLA Yearbook 36, 67.

^[28] [2006] QLPT 12 (Mullins).

^[29] Mullins, [27].

^[30] [2006] WASAT 352 (Fleming).

^[31] Fleming, [60].

^[32] Ibid, [62].

^[33] Ibid, [63].

^[34] Ibid, [66].

^[35] Ibid, [79] – [84].

^[36] [2012] VSC 327 (Kuek).

^[37] CPA Vic, s20.

^[38] Ibid, s25.

^[39] Kuek, [47].

^[40] Kuek v Devflan Pty Ltd [2012] VSC 571, [71].

^[41] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46; (2013) 303 ALR 199 (ERA v Armstrong).

^[42] [1987] 1 WLR 1027 at 1044.

^[43] In ERA v Armstrong, the CPA NSW ss56, 57, 58 and 59.

^[44] Ibid, [56], [57].

^[45] ERA v Armstrong, [59].

^[46] Ibid, [60] - [63].

^[47] [2001] FCA 1333.

^[48] For example, CPA Vic s29(1); Supreme Court (General Civil Procedure) Rules 2005, r63.23(1).